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Daily Pivots: (S1) 0.6634; (P) 0.6654; (R1) 0.6667; More...

AUD/USD is still extending sideway consolidation from 0.6713 and intraday bias remains neutral. Further rally is in favor with 0.6578 cluster support (38.2% retracement of 0.6361 to 0.6713 at 0.6579) intact. On the upside, firm break of 0.6713 will resume whole rise from 0.6361 to 0.6870 resistance next. However, sustained break of 0.6578 will dampen this bullish view, and bring deeper fall to 61.8% retracement at 0.6495.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern to the down trend from 0.8006 (2021 high). Fall from 0.7156 (2023 high) is seen as the second leg, which could have completed at 0.6269 already. Rise from there is seen as the third leg which is now trying to resume through 0.6870 resistance.

Daily Pivots: (S1) 1.3681; (P) 1.3696; (R1) 1.3717; More...

Current strong rebound suggests that USD/CAD's fall from 1.3790 has finished at 1.3626. Intraday bias is back on the upside for 1.3790 resistance. Firm break there should indicate that consolidation from 1.3845 has completed with three waves to 1.3626. Retest of 1.3845 high should be seen next. On the downside, below 1.3675 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern. In case of another fall, strong support should emerge above 1.2947 resistance turned support to bring rebound. Firm break of 1.3976 will confirm up resumption of whole up trend from 1.2005 (2021 low). Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3176 at 1.4149.

Daily Pivots: (S1) 0.8456; (P) 0.8466; (R1) 0.8478; More...

No change in EUR/GBP's outlook and intraday bias remains neutral. Further decline is expected with 0.8482 support turned resistance intact. On the downside, below 0.8429 minor support will bring retest of 0.8396 low first. Further break there will resume larger down trend to 0.8376 projection level next.

In the bigger picture, down trend from 0.9267 (2022 high) is in progress. Next target is 100% projection of 0.8764 to 0.8497 from 0.8643 at 0.8376. Sustained break there will target 161.8% projection at 0.8211 next. For now, outlook will remain bearish as long as 0.8643 resistance holds, even in case of stronger rebound.

Daily Pivots: (S1) 1.6046; (P) 1.6081; (R1) 1.6135; More...

Intraday bias in EUR/AUD is turned neutral first with current recovery. Some more consolidations could be seen first, but outlook will stay bearish as long as 1.6211 resistance holds. Below 1.5996 will target 100% projection of 1.6679 to 1.6211 from 1.6418 at 1.5950. Firm break there will target 1.5846 key support next.

In the bigger picture, fall from 1.7062 medium term top is seen as a correction to the up trend from 1.4281 (2022 low) only. Strong support is still expected between 1.5846 and 38.2% retracement of 1.4281 to 1.7062 at 1.6000 to bring rebound. Break of 1.7062 is in favor at a later stage.

Daily Pivots: (S1) 0.9592; (P) 0.9607; (R1) 0.9636; More....

Intraday bias in EUR/CHF remains neutral and outlook is unchanged. Further decline is expected as long as 0.9683 resistance holds. On the downside, break of 0.9476, and sustained trading below 61.8% retracement of 0.9252 to 0.9928 at 0.9510 will bring retest of 0.9252 low next.

In the bigger picture, rebound from 0.9252 should have completed at 0.9228. Medium term outlook remains bearish with 1.0095 resistance intact. Firm break of 0.9252 will resume the down trend from 1.2004 (2018 high).

Daily Pivots: (S1) 202.69; (P) 203.04; (R1) 203.58; More...

Intraday bias in GBP/JPY remains on the upside at this point. Current rally should target 100% projection of 191.34 to 200.72 from 197.18 at 206.56 next. On the downside, below 202.41 minor support will turn intraday bias neutral first. But outlook will remain bullish as long as 200.72 resistance turned support holds, in case of retreat.

In the bigger picture, long term up trend is still in progress. Next target is 100% projection of 155.33 to 188.63 from 178.32 at 211.62. Outlook will stay bullish as long as 191.34 support holds, even in case of deep pullback.

Key insights from the week that was.

In Australia, the release of the week was certainly the Monthly CPI Indicator for May which reported a lift in headline inflation from 3.6%yr in April to 4.0%yr – as Westpac forecast – and a lift in the annual trimmed mean from 4.1%yr to 4.4%yr. Being the mid-month of the quarter, the May release importantly provided an update on services inflation. While the acceleration in service inflation from 4.0%yr to 4.8%yr was headline grabbing, the underlying composition was of less concern.

To start, the surge in holiday travel and accommodation – which has the equal-highest weight within the services category – surged from –6.2%yr in April to +2.9%yr in May; however, this was largely due to base effects as May 2023’s massive 11.3%mth decline cycled out of the annual rate calculation. Other major services components were either unmeasured, unchanged, or even down slightly in the case of rents and restaurant meals, while small services components were mixed. Goods inflation meanwhile held flat at 3.3%yr.

This detail emphasises the importance of gauging measures which smooth out volatility, such as the index that excludes ‘volatile items’ and holiday travel. In May, this measure moderated from 4.1%yr to 4.0%yr in contrast to the lift in headline inflation. While still consistent with persistent inflation pressures, it does not suggest a re-acceleration in price pressures or new risks.

In this week’s essay, Chief Economist Luci Ellis considers how this update may be perceived by the RBA, drawing on information from this week’s speeches from RBA Assistant Governor (Financial Markets) Kent on Tuesday and Deputy Governor Hauser last night.

Against this backdrop, it is hardly surprising that consumer confidence remains weak. The June Westpac-MI Consumer Sentiment Survey reported a slight 1.3% improvement to 83.6, a level only previously seen during other major economic dislocations. A lift across both ‘family finances vs a year ago’ (+9.7% to 69.3) and ‘time to buy a major item’ sub-indexes (+4.2% to 79.7) is certainly welcome, but both sub-indexes also remain well below their respective long-run averages (88.3 and 124.4 respectively). Views around the labour market also look to have shifted from constructive to cautious, consistent with a softening labour market and moderating job vacancies.

Crucial to the near-term outlook for confidence will be households’ responses to imminent fiscal stimulus, both state and federal, and their views on the chances and scale of interest rate relief. On the latter, the latest updates are not encouraging. Sentiment deteriorated materially between those surveyed before the RBA policy meeting (90.0) and after (80.1), suggesting the RBA’s ‘vigilance’ to upside inflation risks was a cause for concern. Indeed, Westpac-MI mortgage rate expectations correspondingly surged, with around half of consumers now anticipating an increase in mortgage rates over the next year.

Before moving offshore, a final note on industry. The Q2 ACCI-Westpac Business Survey showcased an improvement in conditions for the manufacturing sector moving into mid-year, the Westpac-ACCI Actual Composite lifting back into expansionary territory, from 43.4 to 54.1, after a slower-than-usual start to the year. The rebound in new orders and subsequent lift in output growth was key, both of which have scope to continue contributing positively over the period ahead, not only in manufacturing but also the broader economy (as explored in our latest Coast-to-Coast). However, the survey reminds us that there remain significant challenges facing the sector, particularly around difficulties in finding skilled labour and elevated cost pressures, which are in part being passed on in the form of higher prices. The survey adds to the evidence that supports the RBA’s “vigilant” stance to possible upside inflation risks; but as emphasised above, the Q2 CPI update will be all-important in gauging the extent to which these may materialise.

Offshore, the data this week was mixed, as was commentary from FOMC members.

Canadian inflation surprised to the upside in May, the CPI rising 0.6% against a 0.3% expectation, leaving annual inflation at 2.9%yr compared to 2.7%yr in April. The average of the two core measures is also around 2.9%yr, from 2.7%yr. Unsurprisingly, services inflation was behind the lift in headline and core inflation, accelerating to 4.6%yr from 4.0% previously. While one month’s data does not make a trend, the May outcomes make clear that monetary policy normalisation is likely to prove protracted and result in a return to near neutral policy, not an expansionary setting.

In the US, Q1 GDP edged higher in the third estimate from 1.3% annualised to 1.4%. However, revisions to the detail pointed to softer private demand and inflation prospects. Upward revisions to growth in business investment (from 6.0% annualised to 7.0%), government spending (from 1.3% annualised to 1.8%) and the contribution from net exports (from -0.89ppts to -0.65ppts) were offset by weaker momentum in consumption (growth marked down from 2.0% to 1.5% annualised). Below-trend momentum for the consumer has also been seen at the start of Q2, justifying a belief that demand pressures for inflation are continuing to dissipate.

Durable goods orders held up better than expected in May, rising 0.1%. However, the 0.4% downward revision to April offset the upside surprise in May. Core durable orders (ex transport and defence) were weak in May at -0.6% and April's small gain was little changed at 0.3%, suggesting a decline in real business equipment investment in Q2. The regional Fed manufacturing gauges released this week also pointed to weakness in the business sector, but initial jobless claims remained near their historic lows. It is little wonder that the US consumer remains concerned about the near-term outlook while remaining constructive on medium-term prospects.

Commentary from FOMC members this week was atypical, with concern shown over both downside risks to activity and upside risks for inflation. Thankfully, these risks are not expected to coincide. Rather the varied views speak to a high degree of uncertainty over the outlook. In an interview with CNBC, Chicago Fed President Goolsbee highlighted "a couple of warning signs" with respect to consumer demand. San Francisco Fed President Daly separately noted that we "are getting nearer to a point where the outcomes on employment might be less benign", i.e. where firms need to reduce employment levels not just the pace of hiring. Fed Governor Cook subsequently provided a balanced view on the outlook, consistent with the median expectations of the Committee. Fed Governor Bowman instead focused on upside price risks. Both Governors saw 2025 as the year when inflation would materially decelerate from its current level to near target. Underlying this view is an expectation of persistent strength in the economy and, arguably, little weight on the downside risks that Presidents Daly and Goolsbee highlighted.

Short Term Elliott Wave in USDCHF suggests pair ended the move down from 5.1.2024 high as wave (1) at 0.882. Wave (2) corrective rally is now in progress to correct cycle from 5.1.2024 high. Internal subdivision of wave (2) is unfolding as a zigzag Elliott Wave structure. Up from wave (1), wave ((i)) ended at 0.8853 and dips in wave ((ii)) ended at 0.883. Pair extended higher in wave ((iii)) towards 0.8926 and pullback in wave ((iv)) ended at 0.89. Final leg wave ((v)) ended at 0.8945 which completed wave A in higher degree.

Down from wave A, wave ((a)) ended at 0.892 and rally in wave ((b)) ended at 0.8942. Wave ((c)) lower ended at 0.8912 which completed wave B in higher degree. Pair has resumed higher in wave C. Up from wave B, wave ((i)) ended at 0.895 and pullback in wave ((ii)) ended at 0.8934. Pair extended higher in wave (i) towards 0.8983 and pullback in wave (ii) ended at 0.8952. Up from there, wave i higher ended at 0.898 and pullback in wave ii ended at 0.8956. Near term, as far as pivot at 0.882 low stays intact, expect pullback to find support in 3, 7, or 11 swing and pair to extend higher. ind support in 3, 7, or 11 swing for further upside.

USDCHF 45 Minutes Elliott Wave Chart

USDCHF Elliott Wave Video

https://www.youtube.com/watch?v=JEa7vn_4E4s

Mood yesterday was mixed on a series of mixed economic and corporate news. In Europe, the business and consumer survey came in slightly lower than expected, the CAC 40 lost more than 1%, the Stoxx 600 fell. The German stocks did better than their European peers as some big names like Siemens and SAP outperformed, while in the UK, the FTSE 100 sank below its 50-DMA despite a softer pound and a positive breakout in oil prices.

US crude finally cleared the critical $82pb resistance, and returned to the positive trend that was building at the start of the year. The April to June selloff is fully behind us now, trend and momentum indicators remain positive while the market is not yet in the overbought territory meaning that there is room for further gains in the short run. From a technical perspective, the outlook has improved. From a fundamental point of view, news are supportive as well. Yesterday’s GDP update from the US confirmed that the US economy slowed in Q1 to grow just 1.4%, but the print was slightly better than the 1.3% expected, and down from 3.4% printed a quarter earlier. Sales and consumer spending halved, inventories rose. Price indications were not enchanting but investors looked past these components as the uptick we saw in first quarter inflation is thought to have slowed past the Q1. All in all data was positive for the reflation trade.

Other than that, the US trade deficit widened to highest levels in 2 years, pending home sales fell 2% and the jobless claims rose to the highest levels since last summer. Data hinted at further slowdown in the US economy, but the slowdown didn’t look catastrophic. As such, the data fueled the dovish Fed expectations and boosted appetite for the US treasuries, as well, along with a strong sale of 7-year bonds, following good sales of 2 and 5-year bonds earlier in the week. The US 2-year yield tested but remained above the 4.70% level, the 10-year yield fluctuated near 4.30%. The S&P500 and Nasdaq eked out small gains as Federal Reserve (Fed) rate cut hopes rose, with some investors expecting up to two rate cuts from now to the end of the year, and the US dollar eased, but rebounded in Asia as the presidential debate between Trump and Biden favoured… Trump.

There is one more thing to watch before this week ends: the core PCE data – the Fed’s favourite gauge of inflation that’s expected to show further weakness in both headline and core numbers. If that’s the case, combined with yesterday’s softish growth data, we could see the Fed doves remain in charge of the market. The latter could help broaden the US stock rally to non-tech sectors, and toward the reflation-friendly European markets.

Euro under pressure

Some Eurozone countries will reveal their preliminary inflation numbers for June today. Sufficiently soft data is needed to keep the European Central Bank (ECB) doves alive, but for the euro, the upcoming French election this weekend is probably more important than the inflation figures as regardless of the data – unless we see something very much unexpected – many investors will probably chose to go into the French election weekend without a positive exposure to the euro given that Marine Le Pen’s National Rally is seen securing one vote out of three, and that’s not the outcome that the market is happy with. The spread between the French and German 10-year yield is back above 80bp and could further widen depending on the French election outcome. Higher yield differential means lower appetite for euro. It could be that a blow to Macron has already priced in (and overly priced in) and the euro could rebound in a typical ‘buy the rumour sell the fact’ move on Monday open, but volatility will likely be on the menu and the euro could – regardless of the inflation figures on both sides of the Atlantic – further ease against the greenback before the weekly close. The EURUSD currently trades below 1.07 mark. We could see the pair fall below the 1.0660 level – that acted as a support since Macron called for the snap election.

A last word for the yen: the USDJPY was trading past the 161 level this morning, with no news of intervention on the wire just yet. The yen bears are looking for the limit, while the risk of intervention grows with every pip higher.

Daily Pivots: (S1) 171.60; (P) 171.89; (R1) 172.38; More...

Intraday bias in EUR/JPY remains on the upside as up trend continues. Next target is 100% projection of 164.01 to 170.87 from 167.52 at 174.38. On the downside, below 171.37 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, strong support from 55 D EMA indicates that the long term up trend is still in progress. Decisive break of 171.58 will confirm resumption and target 100% projection of 139.05 to 164.29 from 153.15 at 178.38. For now outlook will stay bullish as long as 164.01 support holds, even in case of deep pullback.